Cumberland Metal Industries

The cost-benefit analysis for the Colerick test is presented in Appendix 1. It can be seen that the asbestos pads took 106.7 hours to complete while CMI pads were able to finish in 75.07 hours. With this significant difference CMI was able to save roughly $8520. These savings were from the decrease in the amount of time spent on equipment rental as well as the decrease in labor and overhead costs for pile driving. The total time saved from using CMI’s pads was approximately 32 hours. Also, Appendix 1 notes that CMI needed only 6 pads to complete the job as opposed to the 480 pads required when using asbestos pads. The total cost of the asbestos pads was $1,000 or $2.10 per pad. This huge difference in amount of pads needed for the test indicates that potential price of the product could have as a ceiling of $1400 per pad

From the comparison test results and the break-even analysis we have determined that the price per pad should be closer to the calculated “price ceiling” because of the number of benefits the new CMI pad brings to the construction industry. The product is safer than the asbestos pads and lot more productive and durable. Appendix 5 shows the final price analysis. Price should not be based on the cost of the product but the value perceived by the customer. We believe an odd price of $999 should be charged, taking into account the huge time-savings benefit provided by the product. At this price the break-even sales volume becomes around 28, which is a very achievable number. We also believe that the cheaper asbestos pads will not pose a large threat to CMI pads because asbestos will become obsolete due to health reasons.

Analysis of the results from the second test, with Fazio Construction Company, comparing the 11.5 inch asbestos pad with the CMI pad, is presented in Appendix 2. Results from the second test were considerably similar to that of the first test. The amount of time saved by using CMI pads in test 2 was calculated to be $9520. These savings are due a decrease in time spent on equipment, labor, and overhead. Again, the second results also indicated that, with respect to the perceived value of the time saved, the CMI

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